The concentration of creditors: evidence from small businesses

Han, L. ORCID: https://orcid.org/0000-0002-2778-3338, Storey, D. J. and Fraser, S. (2008) The concentration of creditors: evidence from small businesses. Applied Financial Economics. ISSN 0960-3107 doi: 10.1080/09603100701720476

Abstract/Summary

This article examines the determinants of concentration of creditors. The empirical evidence drawn from this article supports the proposition of Bolton and Scharfstein (1996) that for negotiation reasons, high-quality borrowers tend to borrow from multiple sources and is contrary to the theoretical prediction of Bris and Welch (2005). This finding implies the existence of hold-up problems in financing small businesses where information conveyance is difficult between lenders. It is further supported by the evidence that dispersed bank relationships are associated with relationships of a longer history and a closer physical distance to lenders.